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They Said, We Said In MSFT/YHOO

By - July 14, 2008

I’ve been watching the developments over the past week, and honestly feel like it’s a bad tennis match – back and forth, back and forth, but no aces, no amazing backhand winners.

Here’s another volley from Microsoft today:

Microsoft Sets the Record Straight

REDMOND, Wash. – July 14, 2008 – On the evening of July 12, Yahoo! Inc. released a statement relating to recent discussions involving Yahoo!, Microsoft Corporation, and Carl Icahn. Microsoft believes the statement contains inaccuracies that need to be corrected. Among other things, the enhanced proposal for an alternate search transaction that we submitted late Friday was submitted at the request of Yahoo! Chairman Roy Bostock as a result of apparent attempts by Mr. Icahn to have Microsoft and Yahoo! engage on a search transaction on terms Mr. Icahn believed Microsoft would be willing to accept and which Microsoft understands Mr. Icahn had discussed with Yahoo!.

Specifically, on Thursday afternoon, July 10, Mr. Bostock called Steve Ballmer’s office to arrange a call. On that subsequent call, Mr. Bostock told Mr. Ballmer that “with substantial guarantees on the table and an increase in the TAC (traffic acquisition cost) rate, there are the pillars of a search only deal to be done.” Mr. Bostock encouraged Mr. Ballmer to submit a new proposal to Yahoo! for a search only deal reflecting these terms.

After considering Yahoo’s request and taking into account Yahoo’s previous feedback about our prior search proposal, Microsoft determined late Friday to propose an enhanced search transaction. This proposal included significant revenue guarantees, higher TAC rates, an equity investment and an option for Yahoo! to extend the agreement over a 10 year period.

Microsoft’s proposal did not include changes to Yahoo’s governance.

At the time Microsoft submitted its enhanced proposal, Microsoft asked that Yahoo! confirm whether it would agree that the enhancements were sufficient to form the basis for the parties to engage in negotiations over the weekend on a letter of intent and more detailed term sheets. This discussion has been mischaracterized as a take it or leave it ultimatum, rather than a timetable in order to move forward to intensive negotiations. Yahoo! informed Microsoft on Saturday that it had rejected the proposal.


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7 thoughts on “They Said, We Said In MSFT/YHOO

  1. coxy says:

    I’m also getting quite sick of hearing about it all now…

    I just wish Microsoft would accept that Yahoo! don’t want to merger or strike a deal and leave them to it – MS are starting to sound desperate.

    As for Icahn, it’s a good job he isn’t looking to win any popularity polls, because right now I hate hearing about him moreso than I do about this whole palaver.

  2. Ben Johnson says:

    Hidden in the smoke of all the back and forth rhetoric are two problems associated with a search-only deal.

    1. Who is going to be in control of Yahoo after the deal?

    2. What happens if the MSFT search-only deal reduces the quality of the search experience offered to Yahoo’s users below that which has been, or otherwise would be achieved by Yahoo itself?

    These issues are intertwined, and not easily solved.

    If MSFT offers poor quality search results to Yahoo’s users, it will substantially detract from the value of all of Yahoo’s remaining assets, including its brand name. The essence of such a deal will be for Yahoo to serve MSFT’s search results and ppc advertising to its users. Since the volume of search traffic fed to MSFT is a direct function of integrating the search function into Yahoo’s other properties, there isn’t any simple way to do a search-only deal without running the risk of doing deep damage to all of Yahoo’s remaining properties, including its brand name.

    This wouldn’t be an issue if MSFT had a proven successful track record in the search market, but after many millions of dollars expended trying to catch up, MSFT’s experience to date suggests it might fall farther and farther behind Google in search quality. Thus, it is easy to see why the Yahoo board might be concerned that a search-only deal could leave them holding the bag — and perhaps even being exposed to some personal financial liability — if a deal goes through and things turn out poorly.

  3. When will it end? We truly wish we could stop this incessant game back and forth – it’s pretty brutal to hear about on a daily basis don’t ya think?

  4. Rob says:

    This is simply another case of Corp bullying from Mr Ballmer and MSFT.

    I do hope Yahoo does not end up being this decades Netscape.

  5. nmw says:

    If we were all teenagers who simply wished to watch Family Guy video clips around the clock, it would be much easier to deliver a one-size fits-all solution.

    But we’re not.

    So while Google’s recent move to shift more into publishing may irritate the publishing industry by attempting to compete on the “media producer” level, there will still be many other sites that will provide access to information as search engines — whether it’s hotels or cars or weather or downloads, there will be search engines for each type of query (and indeed: there will continue to be more and more of them).

    I wish the Google guys the best of luck with their new project to “create all the world’s information”, “advertise all of the world’s Google”, “acquire all the world’s content producers”, “all your content belong to…” — or whatever their new motto for this new project will be.

  6. george says:

    it’s a good job he isn’t looking to win any popularity polls, because right now.

  7. I hope Microsoft does get Yahoo even after all this bickering. I also hope they get it for a lot less than there first offer way back in teh day .